3 Reasons Why Performance Ratings Don't Work

Andy Porter Andy Porter, Bad HR, Metrics, Performance

One of the things we're known for doing here at FOT is shooting straight with our readers and telling you how things really work in HR. If you're looking for a sugar coated message you've come to the wrong place! So I'm going to let you all in on a secret…the traditional performance rating system that the vast majority of companies use doesn't work. Not only does it not work, I'd go even further and say in no particular order they are generally meaningless, tend to demotivate people, are rarely understood, poorly administered and a big fat waste of organizational time. Now I suspect there are some of you are reading this and shaking your head in extreme agreement. You can move on to the next post then. But if you don't agree with my assessment let me give you the 3 reasons why I don't think performance rating systems work…

1. Ratings are falsely precise metrics. Assigning someone a numerical rating gives the perception that the system is “data-based and objective” and often we go to great lengths to try and convince employees of the system's objectivity. Well I've got news for you – the process is entirely subjective. Yeah, you may have 10 pages of competencies to rate someone on but guess what? A real live human being is making the judgment and their judgment is subjective. Wrapping this natural subjectivity up into a number and calling it objective is at best confusing and at worst demotivating.

2. Ratings distract from what really matters. How many of you out there have ever sat through a “calibration” meeting? Wait – did I say meeting? I should have asked how many of you have ever sat through weeks of calibration meetings? The goal of most calibration meetings isn't a bad one. Striving for some consistency in how performance is assessed across a division or organization is generally a good idea. That is until you invited the performance rating to the party. In my experience most of the time is spent arguing about of each of us interprets the rating scale and questioning why someone's ratings are too high. While everyone is trying to understand what it means to be a “5” we've missed an opportunity to talk about what someone actually accomplished. Or worse, since subjective human beings don't always agree on interpretations we just revert back to the mean (which penalizes actual top performers).

3. Ratings are a crutch for managers. The lifeblood of any successful organization lies in the ability of its managers to provide good feedback to their employees. That means sitting down and really thinking about someone's performance and offering specific examples and advice on how to improve. In the world of performance ratings a manager has the option to simply tell an employee their rating, assume they know what it means and move on. Which conversation would you prefer? It's a no-brainer yet we happily hand out this crutch on an annual basis.

Look, I understand that for some organizations performance ratings make sense for a variety of reasons. But there's also a lot of companies out that who are simply following what they consider to be “best practice” who have an opportunity to do something different. I'll talk more about what I would do in place of performance ratings in an upcoming post. In the meantime I'm curious what people have to say about “death to performance ratings!